When European Entrepreneurs really hit the growth button the U.S. is usually the most important expansion target. It’s a natural location: there’s a massive homogenous market. It’s the home to hundreds of the world’s top corporations. It’s an important market for company value creation. And the big money investors seem to live on one street.
But the big question for entrepreneurs eyeing a US expansion is which coast to end up on? The U.S. is huge! And there are many different places you could set down your flag. Austin, Boulder, Boston, LA and a few other hubs are great. But let’s be honest. Most of us coming over the Atlantic are thinking about either the San Francisco Bay Area or New York City. In fact those are the only two locations in the U.S. from which Creandum’s portfolio has chosen to expand. So which one do you choose?
The first question you need to ask yourself is (0) do you have product/market fit? Because without it, you shouldn’t be going anywhere. Stay put, iterate and find something which is ready for growth. Once you’re confident about your product-market-fit, the natural question to ask is what companies or industries do you need to be physically close to hire talent and best hit your market? A good number of startups can benefit by being physically close to (1) Facebook, Google, or Apple if they work directly with these companies, making SF a natural choice.
But moving forward, (2) if you’re in the social, messaging and community space, or if you’re doing hardware or bleeding edge tech like AI, SF is the place to be. Out of the Creandum portfolio Neo Technology (advanced database tech), Narrative (hardware) and Vivino (community + proximity to the NorCal’s Wine Country) are some example of a startups that has moved there.
New York becomes another strong draw (3) for startups in the media, entertainment, ad tech, fashion, e-commerce, digital health, or fintech areas. Tictail (e-commerce), Spotify (media & entertainment) are two examples of startups that have forgone the draw of the Valley to set up shop in NYC.
But outside of the industry you operate in, thinking about your needs to hire local talent is another issue to consider. If you’re hiring a big team (4), SF is probably one of the most expensive places in the world to do that, and New York clocks in a little cheaper. However, if you’re hiring highly technical talent then SF (and probably south in the Bay Area) is the place to find that talent pool (5).
Finally, a very important thing to consider is how much you will need to interact with your U.S. team in their daily operations and talk directly with the team back home (6). New York is six hours away from CET and SF is nine hours away. The difference is massive. At 8am in NYC it’s 2pm in Stockholm and Berlin, and you’ve got a good couple of hours before anyone starts feeling any pain. However, at 8am in SF it’s already 5pm in Central Europe. If you’re doing the SF to CET coordination, people will have to get up early or work late which is part of startup life, but you may want to think through what that means if it becomes part of your daily operational structure. With the company I co-founded, Wrapp, we had an office in both NYC and SF during a certain time, and the pain of coordination between Stockholm and those offices was massively different with benefit to NYC.
There are a million other questions we could have included, but these and most other questions aren’t deal breakers – there’s lots to evaluate back and forth before you decide on a location.